Page 1 of 22

COVER PAGE

SECTOR : TELECOM

COMPANY : Bharat Sanchar Nigam Limited (BSNL)

NAME : ARPAN PARIKH

ROLL NO : 23

COURSE : MBA-BANKING

Page 2 of 22

TABLE OF CONTENTS :

S.NO TOPIC PAGE NO1 INTRODUCTION 32 QUICK FACTS 43 TELECOM SERVICES 54 INDUSTRY SECTORS 55 GROWTH AVENUES 66 GOVERNMENT REGULATIONS 97 KEY INDIAN COMPANIES 108 BSNL-INTRODUCTION 129 MICHEAL PORTER’S FIVE FORCE ANALYSIS 1710 SWOT ANALYSIS 20

Page 3 of 22

INTRODUCTION

Telecommunication is the transmission of messages, over significant distances, for the purpose of communication.

The telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also.  

HISTORY OF TELECOM IN INDIA :

1947 Foreign Telecom Companies nationalized to form PTT

1980’s: The Beginning Tele-density in 1980-81: 0.3% Introduction of public pay phones Private Sector allowed DoT, MTNL and VSNL formed

Early to Mid 90’s Telecom policy 1994 - Basic telephony service to private operators - 49% FDI - 8 licensees began operations in Aug 1995

Late 90’s Birth of a regulator: TRAI NTP 1999 (New Telecom Policy)

2000

CAGR of around 85% since 1999 FDI: 74% (2005)

2007-2009 having the world's lowest call rates the fastest growth in the number of subscribers (45 million in 4 months), the fastest sale of million mobile phones (in a week),

Page 4 of 22

QUICK FACTS

Total telecom subscribers : 429.72 million (March 2010)

Wireless subscribers : 391.76 million

Wire line subscribers : 37.94 million

Tele density : 36.98 per cent

India’s service providers revenue in Q4 (2009): $8.2 billion

India’s Rural Mobile Phone Users : 100 Million

Page 5 of 22

TELECOM SERVICES

Telecommunication sector in India is primarily subdivided into two segments, which are Fixed Service Provider (FSPs) and Cellular Services. Telecom industry in India constitutes some essential telecom services like telephone, radio, television and Internet. Telecom industry in India is specifically emphasizing on latest technologies like GSM (Global System for Mobile Communications), CDMA (Code Division Multiple Access), PMRTS (Public Mobile Radio Trunking Services), Fixed Line and WLL(Wireless Local Loop ). India has a prospering market specifically in GSM mobile service and the number of subscribers is growing very fast.

INDUSTRY SECTORS

From holistic point of view telecom industry can be divided to four sub-sets. The major forces in Indian telecom industry are Service providers. All major telecom equipment suppliers have their R&D centers in India. In last 5 years, global giants in mobile devices have set up their manufacturing facitilities in India. The discussions in this document is mainly restricted to only Telecom Service Providers.

NETWORK INFRASTRUCTURE COMPANIES : Alcatel- Lucent, Cisco, Ericsson

TELECOM SERVICE PROVIDERS : Bharti-Airtel, Vodafone, Idea, Reliance

TELECOM EQUIPMENT MANUFACTURERS : Nokia, Motorola, Samsung

TELECOM SOLUTIONS PROVIDERS : Mahindra, Aricent, IBM, Wipro, Sasken

Page 6 of 22

GROWTH AVENUES :

Managed services is a crucial segment that is attracting telecom companies. On account of the rapidly growing subscriber base, service providers find it difficult to manage their infrastructure and network management operations. In such cases, they completely or partially outsource their infrastructure or network management operations.

To reduce their network deployment costs, many service providers are considering infrastructure sharing offers the following advantages:

Improved service quality

Increased affordability for customers

Faster roll out of services in rural and remote areas

Significant reduction in initial set up costs

Increased environmental aesthetics

Lower operating costs for service providers

Enterprise Telecom Services includes key services, such as voice over Internet protocol (VoIP), dedicated telecom communication systems; IT infrastructure enabled unified

Page 7 of 22

communication services, etc. Telecom service providers are increasingly targeting enterprises by providing dedicated services and is expected to witness major developments in near future.

Virtual Private Network is a private data network that provides connectivity within closed user groups via public telecommunication infrastructure. Competition is likely to heat up in the VPN segment as DoT has relaxed the norms for private players.

3G The Indian government plans to auction the spectrum for 3G services by inviting bids from domestic as well as foreign players, and creating a competitive environment that offers better services to consumers. Therefore, the 3G spectrum is among the major investment opportunities and growth drivers of the telecom industry. The immense potential for 3G is reflected by the 30–40 percent annual growth in Value-Added Services.

Cell phone manufacturers are striving to develop USD 100 priced 3G handsets for the Indian market. India expects to replicate its 2G growth in 3G services.

WiMAX has been one of the most significant developments in wireless communication in the recent past. Since this mode of communication provides network access in inaccessible locations at a speed of more than 4 Mbps, it is expected to be a major factor in driving telecom services in India, especially wireless services. Thus, it will lead to the increased use of telecom services, Internet, value-added services and enterprise services. WiMAX is expected to accelerate economic growth and assist in providing better education, healthcare and entertainment services.

It is estimated that India will have 13 million WiMAX subscribers by 2012.

Aircel is the pioneer in WiMAX technology in India.

The state-owned player, BSNL, aims to connect 74,000 villages through WiMAX.

Bharti, Reliance and VSNL have acquired licenses in the 3.3GHz range to utilise the opportunities offered by this domain.

Value Added Services:The VAS industry was worth USD 632 million in 2006–07. The industry is estimated to grow by 60 percent in 2007–08 and become an USD 1,011 million opportunity.

The VAS industry is currently focussing on the entertainment sector, such as the Indian film industry and cricket; however, there is scope for growth in other avenues as utility-based services, such as location information and mobile transactions.

Rural Telephony: As the government targets to increase rural teledensity from the current 2 percent to 25 percent by 2012, rural telephony will require major investments. This segment will boost the demand for telecom services, equipment, Internet services and other value-added services; thereby, offering great market opportunities for telecom players.

Page 8 of 22

INDUSTRY REVENUE :

According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are expected to touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in India. India has become the second country in the world to have more than 100 million CDMA-based (code division multiple access) mobile phone subscribers after the US, which has 157 million CDMA users. The Indian telecommunications industry is on a growth trajectory with the GSM operators adding nearly 9 million new subscribers in April 2010, taking the total user base to 297 million, a growth of 3.11 per cent over the additions made the previous month.

SUBSCRIBER GROWTH

India added 130 million new customers in 2008-09, the largest globally. The country’s cellular base witnessed close to 50 per cent growth in 2008, with an average 9.5 million customers added every month. By April 2009, the total number of telephone connections reached 441.47 million. With this growth, the overall tele-density reached 37.94 at the end of April 2009. According to Business Monitor International, India is currently adding 8-10 million mobile subscribers every month. It is estimated that by mid 2012, around half the country's population will own a mobile phone. This would translate into 612 million mobile subscribers, accounting for a tele-density of around 51 per cent by 2012.

Page 9 of 22

GOVERNMENT REGULATIONS

The government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry.

1) 100% foreign direct investment (FDI) is permitted through the automatic route in telecom equipment manufacturing

2) FDI ceiling in telecom services has been raised to 74% 3) Introduction of a unified access licensing regime for telecom services on a pan-India basis 4) Plan to introduce mobile number portability in a phased manner 5) The government is implementing a program of connecting 66,822 uncovered villages under the Bharat Nirman programme. The government will invest US$ 2 billion to set up 112,000 community service centres in rural India to provide broadband connectivity in 2008-09. 6) The Department of Telecommunications (DoT) has stated that foreign telecom companies can bid for 3G spectrum without partnering with Indian companies. Only after winning a bid, would they need to apply for unified access service licence (UASL) and partner with an Indian company in accordance with the FDI regulations.

The Indian Telecommunications network with 430 million connections (as on March 2009) is the third largest in the world. The sector is growing at a speed of 46-50% during the recent years. This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors.  The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. 

TELECOM REGULATORY AUTHORITY OF INDIA (TRAI)

One of the main objectives of TRAI is to provide a fair and transparent policy environment which promotes a level playing field and facilitates fair competition. In pursuance of above objective TRAI has issued from time to time a large number of regulations, orders and directives to deal with issues coming before it and provided the required direction to the evolution of Indian telecom market from a Government owned monopoly to a multi operator multi service open competitive market. The directions, orders and regulations issued cover a wide range of subjects including tariff, interconnection and quality of service as well as governance of the Authority.

Page 10 of 22

SNAP SHOT OF TRAI FUNCTIONS

Key Indian Companies

There are three types of players in telecom services:• -State owned companies (BSNL and MTNL)• -Private Indian owned companies (Reliance Infocomm, Tata Teleservices,)• -Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures,Escotel, Idea Cellular, BPL Mobile, Spice Communications)

• BSNL - Incumbent service provider and World's 7th largest Telecommunications

Company providing comprehensive range of telecom services in India

• Services include Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc.

Page 11 of 22

MTNL - State owned operator covering the cities of Mumbai an Delhi Provides both fixed and mobile services.

Bharti Airtel - Integrated operator with presence in all segments Leads the mobile segment in the country

Reliance Communications - Largest player in India in the CDMA segment.

Tata Teleservices - Integrated operator (with VSNL) with presence in all segments. Provides CDMA services in 20 circles.

Page 12 of 22

BHARAT SANCHAR NIGAM LTD (BSNL)

INTRODUCTION

Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India: Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Presently it is one of the largest & leading public sector unit in India.

BSNL has installed Quality Telecom Network in the country and now focusing on improving it, expanding the network, introducing new telecom services with ICT applications in villages and wining customer's confidence.

BSNL is numero uno operator of India in all services in its license area. The company offers vide ranging & most transparent tariff schemes designed to suite every customer.BSNL cellular service, CellOne, has 55,140,282 2G cellular customers and 88,493 3G customers as on 30.11.2009. In basic services, BSNL is miles ahead of its rivals, with 35.1 million Basic Phone subscribers i.e. 85 per cent share of the subscriber base and 92 percent share in revenue terms.

BSNL has more than 2.5 million WLL subscribers and 2.5 million Internet Customers who access Internet through various modes viz. Dial-up, Leased Line, DIAS, Account Less Internet(CLI). BSNL has been adjudged as the NUMBER ONE ISP in the country.

BSNL has set up a world class multi-gigabit, multi-protocol convergent IP infrastructure that provides convergent services like voice, data and video through the same Backbone and Broadband Access Network. The company has vast experience in Planning, Installation, network integration and Maintenance of Switching & Transmission Networks and also has a world class ISO 9000 certified Telecom Training Institute.

Scaling new heights of success, the present turnover of BSNL is more than Rs.351,820 million (US $ 8 billion) with net profit to the tune of Rs.99,390 million (US $ 2.26 billion) for last financial year. The infrastructure asset on telephone alone is worth about Rs.630,000 million (US $ 14.37 billion).

The turnover, nationwide coverage, reach, comprehensive range of telecom services and the desire to excel has made BSNL the No. 1 Telecom Company of India.

Page 13 of 22

SERVICES OFFERED

1) BSNL LANDLINE2) BSNL MOBILE3) 3G SERVICES4) BSNL WLL5) INTERNET SERVICES6) BSNL BROADBAND

REVENUE :

Revenue earned by BSNL during last 5 years.

FINANCE

Bharat Sanchar Nigam Limited, the largest Public Sector Undertaking of the Nation, is certainly on a financial ground that's sound. 

The Company has a net worth of Rs. 88,634 crores (US$ 17.40 billion), authorised equity capital of Rs. 10,000 crores (US $ 1.96 billion), Paid up Equity Share Capital of Rs. 5,000 crores (US $ 0.98 billion) and Revenues is Rs. 35,812 crores (US $ 7.03 billion) in 2009-10.

Page 14 of 22

CUMULATIVE CAPITAL OUTLAY

BSNL has Gross Fixed Assets of over Rs. 132243 Crores (US $ 25.96 billion) as on 31.03.2009.

PARAMETERS For the year ended 31st March 2009 (Rs. In lakh)

For the year ended 31st March 2008 (Rs. In lakh)

INCOME 3,581,192 3,804,683PROFIT AFTER TAXATION

57,485 3,00,939

Eanings Per Share (Rs)

1.15 4.44

GROWTH PLAN

BSNL has continued its growth story ever since its formation & has reached a customer base of 81.49 million as on 31st March,2009 from 28.11 million as on 31 st March,2001. BSNL further plans to increase its customer base to 160 Million by March, 2014.

Page 15 of 22

NEW SERVICES OFFERED BY BSNL :

3G Services : BSNL has started 3G services in 290 cities and acquired more than 6lakh customers. It has planned to roll out 3G services in 760 cities across the country in 2010-11.

Wi-Max : BSNL is in the process of rolling out its Wi-MAX network in rural areas to take an initial lead and provide wireless broadband services in all rural blocks in the country during 2010-11. The Urban Wi-Max is also being deployed in Kerala & Punjab Circles and shall cover all the mojor cities in these circles. Wi-Max services are also being provided through a Franchisee agent with M/s SOMA in three states of Gujrat, AP and Maharashtra.

Value Added Services : BSNL is focussing on provision of value added services/features to attract high end customers and to double its revenues from VAS

Fibre to Home(FTTH) : To meet the demand for high bandwidth services, BSNL is rolling out FTTH services (GPON & GE-PON) for the first time in the country, which is likely to generate substantial revenue in coming years. Services are likely to start by March 2010.

Mobility in WLL: BSNL is planning to provide full mobility on its WLL network from March 2010.

MARKETING INITIATIVES

Marketing vision of the BSNL is based on overall mission and vision of the organization. The mission of BSNL is

i. To provide world class State-of-art technology telecom services on demand at affordable price. 

ii. To provide world class telecom infrastructure to develop   country's economy.  

The vision of BSNL is to become the largest telecom Service Provider in Southeast Asia.

The ultimate objective of any marketing activity is to satisfy the customers and today even a step ahead i.e. ‘delighting’ the customers, for which customers are offered something beyond their expectations from the service or the product. The objective being to acquire and retain the customers, who should continually feel that they are getting more value of the money, they are departing with.

Page 16 of 22

BSNL FOLLOWS THE FOLLOWING MARKETING PROCESS

1)     Discovering what product, service or idea customers want.

2)    Producing a product with the appropriate features and quality.

3)    Pricing the product correctly.

4)     Promoting the product; spreading the word about why customers should buy it.

5)     Selling and delivering the product into the hands of the customer.

CORPORATE SOCIAL RESPONSIBILITY

BSNL is committed to provide quality Telecom Services at affordable price to the citizens of the remotest part of the Country. BSNL is making all effort to ensure that the main objectives of the new Telecom Policy 1999 are achieved. Availability of affordable and effective communications for the citizens is at the core of the vision and goal of the new Telecom policy 1999.

It strives to provide a balance between the provision of universal service to all uncovered areas, including the rural areas, and the provision of high-level services capable of meeting the needs of the country's economy.

BSNL is the most trusted telecom brand in year currently. It has been given Golden Peacock award for Best Corporate Social responsibility. In sales and distribution front BSNL has over one-lakh retailers, 1000 franchisees, 3300 CSCs, 36000 exchanges.

 

 

Page 17 of 22

MICHAEL PORTER’S FIVE FORCE ANALYSIS

It uses concepts developed in Industrial Organization economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Porter referred to these forces as the microenvironment, to contrast it with the more general term macro-environment.

They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess themarketplace.

Page 18 of 22

1.RIVALRY AMONG EXISTING COMPETITORS

Competition in Indian Telecom IndustryMajor PlayersThere are three types of players in telecom services:• State owned companies (BSNL and MTNL).• Private Indian owned companies (Reliance Infocomm,TataTeleservices.• Foreign invested companies (Vodafone, Bharti Tele-Ventures, Idea Cellular, Spice Communications).

2.BARGAINING POWER OF CONSUMERS

Indian Telecom industry is one of the fastest growing telecom markets in the world. In telecom industry, service providers are the main drivers; whereas equipment manufacturers are witnessing growth and decline in successive quarters as sales is dependent on order undertaken by the companies. Airtel, Reliance, Tata and Sterlite are some of the companies that are expected to spur the growth in 2010.According to Cygnus estimates, telecom industry was expected to grow by 25% in 2010 in terms of sales. EBDITA and PAT are expected to grow by 32% and 34% respectively in 2010 as cost expenses are being control by major companies like Airtel and Reliance. The major booster is the wireless mobile subscriber base; crossing over 261m in March 2009. Other services like Internet subscriber base has also provided significant impetus with its subscriber base reaching over 11m in March 2009. The total subscriber base of Wireline services stood at 39.42 million as on 31st March 2009. The incumbents BSNL and MTNL have 80.05% and 9.33% market share respectively in the subscriber base, while all the five private operators together have 10.62% share. Wireline subscriber base has been declining in the last few years. Subscriber base for some of the companies like Bharti, Tata (Tele & Communications), MTNL and Reliance increased marginally. On the other hand, BSNL, Shyam and Telelinks have lost marginal subscriber base in 4th QUARTER OF 2009, as compared to the previousquarter.

MARKET SHARE OF WIRELESS OPERATORS TILL 2009

Page 19 of 22

3.Bargaining Power of Suppliers :

As far as telecom industry is concerned, it is service based industry which isintangible, so in this case there are less suppliers. The role ofsuppliers is almost negligible in the case of telecom industry.

1. Mobile hand set suppliers: - There can be many suppliers for handset, some of them are Nokia, Sony Ericsson, Motorola, Siemens etc. Many big telecom giants have their own handset manufacturing (back ward integration) like Reliance Classic, Tata Indicom or they have collaboration with some known companies like Reliance communication have tie ups with Samsung and LG for their CDMA services.

2. Some other suppliers for this industry can be the Optical fibre suppliers, Aluminum suppliers (aluminum is required for the tower) but their bargaining power is limited.

3. Other important parameters can be the software assistance where suppliers can have the edge some of the main software solution provider are TCS, Infosys, Wipro, Satyam etc.Again one thing is noticeable that big giants like Reliance and Tata have their own units for software solution and companies like Vodafone, Spice are taking services from above stated companies.so here software providers have bargaining power because suppose Vodafone can’t go to Reliance info for their software solution so here suppliers can have edge over the companies.

  4.THREAT TO NEW ENTRANTS

The Indian telecom sector offers unprecedented opportunities for foreigncompanies in various areas, such as 3G, virtual private network, international long distance calls, value added services, etc. witnessing M&A activities that are leading to consolidations in the industry. This trend has assisted companies in expanding their reach in the Indiantelecom market to offer better services to customers. The Indian telecom industry has always allured foreign investors. In fact, the cumulative FDI inflow, from August 1991 to March 2007, in the telecommunication sector amounted to US$ 3,892.19 million. This makestelecommunication the third-largest sector to attract FDI in India in the post liberalisation era.In India large numbers of players are emerging in the market on the national level from its state level existence such as Aircel, Virgin, Spice, Idea, Unitech.

5.SUBSTITUTE TO PRODUCT

Telecom sectors offers a wide range of services in India, such as wireline, CDMA mobile, GSM mobile, internet, broadband, carrier, MPLS-VPN, VSAT, VoIP, IN, etc.

Internet telephone : It is emerging as a best option in place of because it is cheaper and videoas an added advantage

Page 20 of 22

SWOT ANALYSIS OF BSNL :

STRENTHS 

Pan-India reach Experienced telecom service provider Total telecom service provider Huge Resources (financial & technical pool) Huge customer base Most trusted telecom brand Easy deployment of new services Huge Optical Fibre network and associated bandwidth

  WEAKNESSES

Non-optimization of network capabilities Poor marketing strategy Bureaucratic organizational set up Limited number of value added services Poor franchisee network Legacy of poor service image Huge and aged manpower Procedural delays Lack of strategic alliances Problems associated with incumbency like outdated technologies, unproductive rural

assets, social obligations, political interference, Poor IT penetration within organization

 OPPORTUNITIES 

Tremendous market growing at 20 lakh customers per month Untouched international market Diversification of business to turn-key projects Leveraging the brand image to source funds Almost un-invaded VSAT market Fuller utilization of slack resources Can make a kill through deep penetration and low cost advantage Broaden market expected from convergence of broadcasting, telecom and entertainment

industry

Page 21 of 22

THREATS

Competition from private operators Keeping pace with fast technological changes Manpower churning Multinational eyeing Indian telecom market Decreasing per line revenues due to competitive pricing Private operators demand to do away with ADC can seriously effect revenues Populist policies of government like “OneIndia” rates.

BIGGEST COMPETITOR OF BSNL : BHARTI AIRTEL

SWOT ANALYSIS :

STRENGTHS

• It has more than 75 million customers as of March 2009. It is the largest cellular provider in India.

• It has a presence all across India. This has underpinned its large and rising customer base.

WEAKNESSES

• The company owns very few transmission towers, so it cannot provide wide courage nationally. This is the biggest strength of BSNL.

OPPORTUNITIES

• Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea Cellular to create a new independent tower company called Indus Towers. This new business will control more than 60% of India's network towers.

• IPTV is another potential new service that could underpin the company's long-term strategy.

• The tie up of Airtel with Google will help enhance their brand.

THREATS

• The 5.6 % stake that Vodafone had in Airtel was sold back to them and Vodafone invested it in Hutchison Essar. Knowledge and technology previously available to Airtel has now moved into the hands of its competitors.

Page 22 of 22

• The network of Airtel is very much vulnerable. Due to limited towers, coverage is not upto the mark. As a result it is losing out on many customers every year.

REFERENCES :

.1) IBEF report 2007-08 : Telecommunication - MARKET & OPPORTUNITIES

2) Cellular Statistics – Cellular Operator Association of India

3) Official Website of BSNL : www.bsnl.co.in

4) Official Website of TRAI : http://www.trai.gov.in